The CTO of Ripple listed and explained the three main factors that he believes led to the fall of the FTX crypto empire.
David Schwartz alleges that crypto-exchange-linked trading company Alameda Research used customer funds, which he says was the biggest reason for the collapse of troubled FTX.
The second reason Schwartz cites was deliberate mixing of FTX’s client deposits with funds that Alameda could use for high-risk investments. In response to claims from FTX’s new administration, former CEO Sam Bankman-Fried has begun claiming that the assets were pooled “unknowingly” and denies that fraud was committed.
The third reason, says David Schwartz, is that although Alameda committed to using risk management procedures to neutralize their impact, in practice it did not manage risk at all.
According to Schwartz, the only way to stop crypto CEOs from making the same mistakes that former FTX CEO Bankman-Freed made was to implement automated checks and balances.
Earlier, the CTO of Ripple said that despite the exemplary situation with the FTX trading platform, the cryptocurrency community is unlikely to be cautious in the future.
Source: Bits
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